Fiscal Cliff Coming; How We Got to the Fiscal Cliff; Words to Stop Using in 2013

Aired December 29, 2012 - 16:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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ANNOUNCER: This is CNN breaking news.

MARTIN SAVIDGE, CNN CORRESPONDENT: And moments ago we received word the condition of former president George Herbert Walker Bush has reportedly improved. He's now been moved from intensive care to a regular room at the Methodist hospital in Houston. A spokesman says he will continue his recovery there. Good news.

Now, to other news. In just three days, America will go over that fiscal cliff, unless of course these folks, which we're about to show you right here, are able to prevent it. They are in control of whether or not your taxes will go up come the New Year's Day. Senate Majority Leader Harry Reid, Minority Leader Mitch McConnell, House Speaker John Boehner, and House Democratic Leader Nancy Pelosi: all four met at the White House yesterday afternoon with the president and vice president.

And Jessica Yellin is our chief White House correspondent.

And Jessica, the president used his bully pulpit after that meeting to sort of reinforce the idea that senators need to get busy. So let's give that a listen first.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The American people are watching what we do here. Obviously, their patience is already thin. This is deja vu all over again. America wonders why it is that in this town for some reason you can't get stuff done in an organized timetable, why everything always has to wait until the last minute.

Well, we're now at the last minute. And the American people are not going to have any patience for a politically self-inflicted wound to our economy, not right now.

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SAVIDGE: Jessica, you -- sorry; stepped on the president there.

You were in the room for the president's remarks and he said that he was optimistic but he was also clearly a bit ticked off. So I'm wondering about this waiting until the last minute, the weekend, to get this all done. What is the mood in Washington now, and how likely, is the real question, is there to be a deal?

JESSICA YELLIN, CNN CHIEF WHITE HOUSE CORRESPONDENT: There's a little bit more hope now than there was 48 hours ago, Martin. And there is a sense that parties on -- parties see a way for this to move forward.

The staffs of Senator McConnell, the Republican leader on the Senate, and the Democratic leader, Senator Harry Reid on the Hill, are in contact and have been going back and forth over deal points during the day.

If they can come to some kind of an agreement, then the two leaders have already said, as you know, that they will hammer out that deal and then bring it to -- try to sell it to their members and bring it to a vote sometime maybe tomorrow late.

We understand that -- we heard, according to our producer, Ted Barrett, and Lisa Desjardins up on Capitol Hill, there was some paper walked into a Senate office and then someone walked out without the paper. I know that sounds about as dull as it gets but that is movement on Capitol Hill today.

So maybe there will be some progress toward either a deal or the breakdown of a deal.

SAVIDGE: I see.

YELLIN: But that's a little bit of movement. At least we know they are talking.

SAVIDGE: Yes, right. So no wonder we didn't have the breaking news banner up.

Well (inaudible) --

(LAUGHTER)

SAVIDGE: -- of the compromise that has to be struck -- and this does have to be a bipartisan compromise -- clearly both sides are going to have to give in. So no one side is going to get everything they want, will they?

YELLIN: No. And, you know, everybody accepts that that's the case in any of these negotiations. The headline, you know, item is tax estimates, tax revenues and where tax rates will increase, what's the threshold.

Democrats have been saying that they would like tax increases to affect households that make $250,000 and more. They would also insist on extending unemployment benefits.

They would like to see -- the president would like a delay in those automatic spending cuts, those massive spending cuts that Congress set into motion that should hit beginning in the new year. And then also an increase in the estate tax, which is also planned to hit in the new year.

Republicans would like, in order to be able to vote for some sort of deal, to limit that threshold and where -- sorry; limited threshold where the tax increase hits. So maybe instead of $250,000, maybe $400,000, a way to avoid that estate tax increase.

They would like no delay in those spending cuts, so that they will start to hit in the new year. And they would like Democrats to agree to pay for the unemployment benefits.

Now we don't know if -- which of these items would be in the deal they're working out today, except we do know that the tax increase is definitely a part of it, and extension of unemployment benefits definitely would be a part of it, Martin.

SAVIDGE: All right, Jessica Yellin. We continue to follow this, and we will do it with your help. Thanks very much for joining us.

YELLIN: Thanks.

SAVIDGE: OK. So I think it's clear, we are running out of time if you want some sort of 11th-hour rescue. So how on Earth did we get here? CNN's chief business correspondent, Ali Velshi, shows us.

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GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: And now we have passed a bold package of tax relief for America's families and businesses.

ALI VELSHI, CNN HOST (voice-over): It starts more than a decade ago when then President George W. Bush initiated a series of tax cuts for all Americans. But it's a deal with the devil.

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VELSHI: The cuts, which are politically expedient, but costly to government, expire in 10 years' time.

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OBAMA: Both houses of Congress have now passed a package of tax relief that will protect the middle class.

VELSHI (voice-over): When it came time for the cuts to expire, the U.S. is just emerging from the worst recession since the Great Depression. So President Obama agreed to extend the tax cuts for two more years in exchange for Congress extending federal emergency unemployment benefits.

Those cuts are expensive. If they're extended, by 2020 the Bush era tax cuts will be responsible for more than half the total national debt. Democrats insist that taxes go up for the wealthy, but stay in place permanently for those earning less than $250,000 a year.

JOHN BOEHNER, SPEAKER OF THE HOUSE: We need to stop the job-killing tax hikes, and we need to start cutting spending now.

VELSHI (voice-over): Republicans refuse to play ball. They say no higher rates on the rich, no tax hikes on anyone, based on an ideology that calls for government to be as small as possible.

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VELSHI: Now its roots are as old as American politics but today the philosophy's main spokesman is this man --

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VELSHI (voice-over): -- Grover Norquist, president of Americans for Tax Reform. Norquist's pledge, signed by almost all Republicans in Congress, forbids signatories from raising taxes ever, under any circumstances.

Things come to a head in the summer of 2011. Republicans demand the government reduce its deficit as a condition for raising the nation's debt ceiling. Without a deal, the U.S. would lose its ability to borrow money. Both Democrats and Republicans deploy scorched earth tactics that nearly shut down the government and ultimately cost America its AAA credit rating for the first time in history.

But in a last-minute compromise, both sides agree to $1 trillion in spending cuts up front and another $1.2 trillion in cuts to be decided by a special congressional super committee.

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VELSHI: But a poison pill was attached. If the super committee can't reach a deal, automatic across-the-board cuts, known as the sequester, would go into effect, starting January 2013 at the exact moment when those Bush tax cuts, extended for two years, if you remember, would expire.

So the point is, we could have all seen this coming, and some of us did. We yelled at the top of our lungs about it, but we were drowned out by the election. It seems common sense and good governance often get drowned out by seemingly endless and continuous elections in America. This time, there may be a serious price to pay for it.

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SAVIDGE: Ali Velshi on how we got to the edge of the cliff.

In other news, police in Webster, New York, have arrested a woman in connection with that ambush on Christmas Eve.

(BEGIN VIDEO CLIP)

SAVIDGE (voice-over): Two firefighters were shot and killed and two others wounded when they arrived to put out a fire at William Spengler's house. Police say that this woman, Dawn Nguyen, the gunman's neighbor, illegally bought the guns used in that ambush, according to the U.S. attorney. The assault rifle and the gun were found with Spengler, who committed suicide.

(END VIDEO CLIP)

SAVIDGE: The U.S. embassy has offered its condolences after the death of a young woman gang raped on a bus in New Delhi, India. Doctors say that she died peacefully at the Singapore Hospital where she was being treated.

Authorities have added now murder charges against the six suspects arrested in that rape case. The charges are actually to be filed Thursday. Angry protesters have been demanding justice and more protection for women. And police expect more demonstrations in the days to come.

A large crowd of cheers as they cheer the first couple to get married under Maine's new same-sex marriage law, Steven Ridges and Michael Snell of Portland tied the knot just after midnight this morning. Voters in Maine and Maryland approved same-sex marriage in November.

If lawmakers fail to make a deal this weekend, Americans aren't the only ones who will deal with the consequences.

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VERNON HILL, IREPORTER: My New Year's message to Washington is to grow up, act like adults, do your jobs or resign immediately. We are tired of your being useless and refusing to do your jobs.

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SAVIDGE: Americans are not the only ones that are waiting to see if a budget deal is reached in Washington. If the U.S. economy falls off the fiscal cliff, it will have an impact around the world.

Hal Sirkin is a partner at the Boston Consulting Group and follows overseas markets and he joins us now from Chicago.

Hal, thanks for being with us on this weekend. The idea --

HAL SIRKIN, BOSTON CONSULTING GROUP: Great being with you, Martin.

SAVIDGE: Thank you. The idea of the world being affected by the fiscal cliff problem here in America wasn't really lost on the president after his meeting with congressional leaders yesterday. Let's just listen to his comments.

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OBAMA: I'm modestly optimistic that an agreement can be achieved. Nobody is going to get 100 percent of what they want. But let's make sure that middle class families and the American economy and, in fact, the world economy, aren't adversely impacted because people can't do their jobs.

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SAVIDGE: So that begs the question, Hal. How are other countries preparing for this really precarious situation and one in which they really have no control?

SIRKIN: Well, Martin, there's not much they can do to prepare. What will happen, if the fiscal cliff turns out to take place, is that we'll start to see the economy beginning to slide. The first thing that has happened already is that a lot of small businesses and other companies have been holding back on spending and on hiring people because they're worried about the tax rate increase.

But starting in January 1st, we're going to start seeing things like payroll taxes going up, and we're going to see other taxes starting to come into place that will be very difficult for some people. But that's only the beginning.

In February, we're going to have to deal with the debt crisis and the debt ceiling. And that's going to be an issue that will make the economy even more unstable.

And by May and April, we're going to start to see things like estimated taxes increase and the government really being forced to stop spending because it's going to start to run out of money from the standpoint of the new budget.

And if this goes on, all the way through December, we're going to start to see the U.S. entering a recession, and unemployment going up. So this is a very bad situation if we let it go. On the other hand, this is something that can actually be solved very easily.

SAVIDGE: All right.

(CROSSTALK)

SAVIDGE: Let me stop you, because I just want to get in a couple questions before we run out of time.

Many analysts will tell us, actually, that the biggest worry they have outside of the tax hikes and the spending cuts is the uncertainty of what politicians will do. And I'm wondering, the markets really do not like uncertainty. How's that likely to affect, say, world markets come Monday if there's no deal?

SIRKIN: Well, no one likes uncertainty. Markets certainly don't like uncertainty. So this can be a major hit in terms of how the world looks at it, not just for the U.S., but global markets.

The U.S. is still the largest economy in the world. We still have the most influence in the world. And we can see some potential movements downward. Hopefully not too far, but we can see movements downward, just not on the Dow Jones Industrial but on all global indices.

SAVIDGE: What about China? They own a lot of our debt. How do they look at all of this? SIRKIN: Well, China, I think, looks at this as part of the issues around democracy. China is not a democracy. They have a very centralized government and what they're watching is some of the confusion that exists in a democracy. Democracy has a lot of advantages, but making decisions quickly is not one of them.

SAVIDGE: All right. Well, how about Treasury Secretary Tim Geithner, because he says that we are of course about to hit that debt ceiling, the legal limit at which a country can borrow money to pay its bills. And that has as much effect on the markets as the cliff, correct?

SIRKIN: Absolutely. And maybe even more, because the worst thing that could happen is that we stop paying our bills. The world is willing to give us money to help us pay our bills; the world is willing to accept a lot of things.

But if the U.S. government stops paying its bills because it has hit the debt ceiling, that could be disastrous. That would mean clearly an entry into a recession and a lot of unemployment because that would cause, in many ways, the full faith and credit of the U.S. to be put in jeopardy.

SAVIDGE: Hal Sirkin. He is a partner at the Boston Consulting Group. Thank you very much for talking to us. And as he demonstrates, the fiscal cliff is more than just an American problem. Thanks again.

SIRKIN: Thank you.

SAVIDGE: They are words that one university wants to get rid of. Amazing. Baby bump. Ginormous. And man cave. So what words and phrases are getting the boot for 2013? We'll take a look at some of the top contenders coming up.

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SAVIDGE: It's the last word on 2012 -- or rather, last words that you might want to use in 2013.

Every year, Lake Superior State University releases a list of words they want to be banished for their, quote, "misuse, overuse and general uselessness." And "spoiler alert," which is one of those phrases -- I've used several others on the air today.

So John Shibley, he is the man, the -- one of the creators, I should say, of this list. And he joins us with a look at some of the words and phrases that got the most nominations.

So let's start with the phrase "bucket list," people just don't like that? How did it get overused?

JOHN SHIBLEY, LAKE SUPERIOR STATE UNIVERSITY: It's just overused. There is a very popular movie. Everybody started adding to their bucket list. And, well, people just got tired of hearing it and that's what this list is for, it's to cleanse the language in a tongue-in-cheek sort of way.

SAVIDGE: Yes. And I should have said, it's nice to see you, by the way. It is very good to see you, thank you for joining us.

But what about the word "trending?" Why does that irk people so?

SHIBLEY: Well, I don't know if it irks people. It sort of taps into the social media ,what's trending on social media. We don't say we're following this in the headlines now; this is what we're following for you in the news. This is what's trending.

And it's sort of -- reminds us that life moves at a breakneck speed and that we're always connected. So I think people sort of reject the whole idea of being drawn upon in the section (ph) of trending.

SAVIDGE: Yes, I think we do kind of limit our vocabulary as a result of just using these cliche phrases.

But here's another one for you, "spoiler alert." And I have already used that, I believe, in the newscast. So that got a lot of votes too, correct?

SHIBLEY: Yes, it did, because nobody likes to see a spoiler come down the pike. And as soon as you say "spoiler alert," you know that either it's something you already know or it's something you quickly will want to mute the television so you won't find out, at least when it applies to sports.

SAVIDGE: And fiscal cliff, which I think I've said a billion times already today. That is right up there. And I get that one.

SHIBLEY: Yes, well, fiscal cliff. It involves economics, it involves politics. A lot of people think it's going to increase the deficit, which it isn't. A lot of people are worried about it's going to decrease the deficit too soon. So a lot of complicated issues and a lot of political issues. And of course we hear it all the time.

SAVIDGE: So let's talk about Lake Superior State University and how this list compiling all began.

SHIBLEY: It was a bet New Year's Eve, 1976.

(CROSSTALK)

SHIBLEY: Yep. Yep. And they discussed how many words and phrases are overused too often. And the originator of this list back in 1976 went back and drew up a list of five words to submit to UPI, United Press International. And the whole thing took off from there, and now we take nominations from all over the world. Whatever floats to the top gets to our list.

SAVIDGE: Yes. And I was going to ask how that happened. But you just mentioned that. People can, what, apparently make suggestions, somehow contact your university and say here's a word I want banished.

SHIBLEY: Yes, LSSU banished. Just do a search on LSSU banished, and it will get you right to our page. And there is still time to vote, by the way. We -- the list comes out on Monday at 12:01. But if we get anymore packed ballot boxes, we'll be sure to include those. SAVIDGE: OK. So you could do that right now, stuff the ballot box.

A few of the words that were banished for 2012, let's just go over them. Amazing. Baby bump. Ginormous. And man cave. Those were the top vote-getters, apparently, last year, this year?

SHIBLEY: Yes, they were. And my man cave is a '93 Jeep Cherokee that I've got as my extra closet. We don't really want people to stop saying and using these words. This is part of the richness of the English language. Just stop and slow down about how you express yourself.

SAVIDGE: Right, because these words clearly are not going to go away. They're going to linger in the lexicon of things, right?

SHIBLEY: Yes. And for the past 40 years, we've accumulated about 1,000 words and phrases. And you could write a book using them. In fact, they'll never go away. The only thing we want you to do and the only serious part of this list, this tongue-in-cheek list, is just to slow down and think about how you express yourself.

SAVIDGE: And, by cracky, come up with your own phrase and start a trend somewhere else.

SHIBLEY: Yes.

SAVIDGE: Yes.

SHIBLEY: The unexamined language is not worth speaking.

SAVIDGE: All right. Well, I applaud the effort. Thanks very much for joining us. Great to hear from you up there. And hopefully you won't get too much snow.

SHIBLEY: We'll hang in there until spring.

SAVIDGE: Good luck on that. Thank you. All right.

So they want the phrase "fiscal cliff" banned in 2013. I can't blame them there. But what about "dairy cliff," why you could be spending a lot more on milk products if Washington doesn't get its act together soon.

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SAVIDGE: Welcome back to the CNN NEWSROOM, I'm Martin Savidge. And here's a look at our top stories as we head toward the bottom of the hour.

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SAVIDGE (voice-over): Former President George Herbert Walker Bush's health has improved. Our oldest living president has been moved from intensive care to a regular room at the Methodist Hospital in Houston. A spokesman says that he will continue his recovery there.

The U.S. Senate's top leaders are negotiating today; they are hoping to avert a slide off that fiscal cliff. They've got until New Year's Day to reach a budget deal or taxes for nearly everybody is going to go up and 2 million unemployed workers will lose their jobless benefits.

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SAVIDGE: The U.S. embassy has offered its condolences after the death of a young woman gang raped on a bus in New Delhi, India, died. Doctors say that she died peacefully at the Singapore Hospital where she was being treated. Authorities have added now murder charges against the six suspects arrested in the rape case. The charges are expected to be filed Thursday.

Angry protesters have been demanding justice and more protection for women and police expect that those demonstrations are likely to grow in the days to come.

(END VIDEO CLIP)

SAVIDGE: Authorities have charged a woman with providing a convicted killer with the weapons he used in that Christmas eve ambush in Webster, New York.

(BEGIN VIDEO CLIP)

SAVIDGE (voice-over): Two firefighters were fatally shot and two others wounded when they arrived to put out a fire at William Spengler's house. Police say that this woman, dawn Nguyen, the gunman's neighbor, illegally bought the guns used by Spengler.

And here's what's trending online. Forget about that fiscal cliff. The nation is also facing a dairy cliff. There is a deadline looming for Congress that would impact every single dairy farm in this country. And the price you pay for milk if Congress doesn't approve an extension to the farm bill by January 1st, prices could eventually jump to 8 or $9 a gallon.

And a new look for a major league baseball team. Check out the snazzy new hat design for the Atlanta Braves.

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SAVIDGE: CNN NEWSROOM continues at the top of the hour, but first Dr. Sanjay Gupta's investigation reveals startling truths about prescription drug abuse in the U.S., why it's much easier than you think to take that deadly dose. "DR. SANJAY GUPTA MD" starts right now.